In the measuring cup, stir together the water and sugar and yeast. Let stand for
5 minutes, stirring occasionally, until mixture is foamy (if no foam, start
again). Meanwhile in a large bowl, stir together milk and salt. Stir in yeast
mixture, cheese and pepperoni. Stir in 2 1/2 cups of the flour. Stir in as much
of the remaining flour as necessary to form a soft dough.

Turn onto a floured board, knead 7 minutes, using as much of
the remaining flour as necessary until dough is no longer sticky. Place in a
greased bowl, turning dough to completely coat with grease. Cover bowl with
plastic wrap. Set in a draft-free warm place to rise until double in bulk. Punch
down, divide dough in half.

Roll each half into a log 2 inches shorter than mold. Place
in greased mold and cap each end.

Bake in preheated 400° F. oven for one hour or until bread
sounds hollow when tapped. Remove from mold to cool.